Posing Threat to Korean Firms
O-film, a Chinese smartphone component maker, ranked first in fingerprint recognition module market shares in the world last year. The company achieved a rare feat thanks to a spike in its fingerprint recognition modules to Huawei and other Chinese smartphone makers. Its total sales which had amounted to 3 trillion won (US$2.7 billion) in 2015 exceeded 4 trillion won (US$3.6 billion) last year thanks to the growth of its fingerprint recognition module business.
Chinese smartphone parts makers are growing rapidly. Chinese smartphones such as Huawei, Oppo, and Vivo began to grow while putting a good fight in the global market. The addition of technological competitiveness is empowering them to rise as global players.
According to industry sources on August 21, after O-film ranked first in the global fingerprint recognition module market, Sunny Optical of China is taking off in the camera module sector. The company is also emerging as a global camera module manufacturer, securing its major customers in China, including Huawei, Oppo and Vivo.
According to iResearch and Hana Financial Investment, Sunny Optical's market share stood at 8% in 2015, followed by LG Innotek, Sharp and Samsung Electro-Mechanics. In addition, Sunny Optical exceeded market expectations in the first half of this year and its share price reached an all-time high. Sunny Optical posted 10 billion yuan in sales, a 70% increase from the same period of last year, and 1.2 billion yuan in net profit, up a whopping 149% from a year before.
Goodix, a fingerprint recognition chip company, is also enjoying remarkable growth. Smartphone fingerprint recognition requires chips (ICs), algorithms and modules. Goodix is a semiconductor company that makes ICs among them. An increase in smartphones with fingerprint recognition functions sparked off the growth of Goodix and its sales climbed to 468 billion won (U$421 million) in 2016 from 189 billion won (US$170 million) in 2015. Its operating profit also jumped from 65 billion won (US$58 million) to 131 billion won (US$117 million).
The reason why a lot of attention is being paid to such Chinese parts companies is that they have a significant impact on Korean industries. As Chinese parts companies have the same customers as Korean parts companies, the growth of the former translates into intensifying competition with Korean companies. Chinese companies’ stronger competitiveness can be a negative factor for Korean companies.
In fact, this kind of thing is playing out in the fingerprint module market. Sales of CrucialTec, a Korean fingerprint recognition module maker, are shrinking in China due to a good fight by O-film. The proportion of Chinese sales in CrucialTec’s total sales which stood at 47% in 2015, dropped to 12.3% in the first quarter of this year. Sunny Optical is threatening LG Innotek and Samsung Electro-Mechanics. Scale economies and advanced technologies such as dual cameras enable Sunny Optical to better compete with Korean rivals.
Chinese smartphone parts are not only limited to their own markets but are expanding overseas. Goodix, which supplied sensors mainly to Chinese smartphone makers such as Xiaomi, Lenovo and Huawei, started supplying fingerprint sensors to LG Electronics this year. LG’s 'Stylus 3' and 'K10' were loaded with Goodix sensors. The Korean parts industry is now facing competition with Chinese parts companies not only in China but also in overseas markets.